Investors chipped away at Intel shares on Friday after analysts at Goldman Sachs downgraded the stock, citing "deeper rooted" manufacturing issues with its 10-nanometre (nm) chips than previously thought.
Intel shares fell as much as 3.7 per cent before trimming their losses to trade 2.8 per cent lower at $48.74 after analysts at Goldman cut it to “sell” from “neutral” and lowered the price target to $44 from $49 previously.
The move to 10nm chips, from its current generation of 14nm ones, has been riddled with multiple delays and hurt Intel’s reputation as a leader in the chip industry. In July, Intel pushed out the release of the 10nm chips to the 2019 holiday season, having said three months earlier that “volume production” of 10nm systems was “moving from the second half of 2018 into 2019”.
“We see Intel’s struggles with 10nm process technology having ramifications in terms of its competitive position – across a broad set of products, “ said Toshiya Hari, analyst at Goldman.
"While the 10nm push is well-publicised at this point, we believe Intel's manufacturing issues could potentially be deeper-rooted than what most think and could have a sustained impact on market share and/or spending levels as Intel competes with a growing/stronger TSMC [Taiwan Semiconductor Manufacturing Co] ecosystem," he added.
Mr Hari noted Intel's current timeline for a launch of the 10nm in the second half of 2019 creates a competitive risk from rival TSMC, which has "made consistent progress" in moving from 28nm in 2011 to 10nm in 2016 and is on its way to introduce 7nm chips later this year.
“Any slowdown in the Enterprise spending environment – although this is not our base case view – would also add to the earnings decline we forecast in 2019,” he said.
Intel shares were up 8.6 per cent in the year to date as of Thursday’s close. – Copyright The Financial Times Limited 2018
